•ENRC’s $550m deal to buy out the remaining 49.5% of Camrose cleans up the corporate structure but is a clear reminder of a deal which the ENRC board might prefer to forget.

•Pressure has been put on the company by transparency campaigners who do now want to see offshore companies used to control activities in the DRC to help reduce corruption of officials in the region. The move is seen as consolidating ENRC’s position

Mario Monti steps down as Berlusconi rescinds support

•Berlusconi can not stand as prime minister again but is also unlikely to go to jail despite recent convictions.

•Berlusconi, age 76, passed a law during this tenure stating that no one older than 70 can be sent to prison in Italy, though we feel sure exceptions could be made.

Economic View

US – Non farm payrolls beat all estimates and jumped 146,000 in Nov. Market commentators suggest numbers do not reflect Sandy storm adverse effects that may show up in Dec data.

•Greece is buying back €27bn (face value) worth of bonds (€10bn from local investors and €16bn from international lenders). The government is using €10bn loan from the European bailout fund. Bonds averaged a discount of 67% of face value with maturities ranging from 2023 to 2042.

China – Nov monthly passenger-vehicle sales increased to the highest in almost two years on stronger consumer confidence and dealerships increased discounts to cut stockpiles.

Japan – The economy contracted at an annualized rate of 3.5% in the three months through Sep, matching a preliminary estimate. The government revised the previous quarter to a 0.1% decline. This makes Japanese economy technically in recession.

•Post elections on Dec 16, the new party is likely to aim for more fiscal stimulus and “unlimited” monetary easing to boost the economy.

•Analysts estimate the economy to decrease by 0.4% (annualized) in the Oct-Dec period and grow 1.6% in the next three months.

Gold US$1,710/oz vs US$1,700/oz last week – Gold is up this morning on strong investment demand and positive economic data released in China last weekend.

•Barclays opened the largest gold vault in Europe amid strong prices and rising investment demand.

•Vault specs: situated within a 20-mile radius of central London, security includes fingerprint identification systems with a blood flow detector, roof is electrified and doors are claimed to withstand rocket-propelled grenades.

•Rising costs and on heavy rains in Indonesia are blamed for the fall in tin production, however uncertainty over the receipt of future export permits out of Indonesia may also have reduced investment into the tin industry in Indonesia hampering production. Miners have a rocky road to tread in the export of tin ores to China.

•Not only are the Indonesian’s adding regulations to attain export permits but the Chinese are also known to adjust regulations for the issuance of import permits for raw materials.

•It is easy to see Indonesian miners struggling to match their mining schedules with the issuance of import and export permits. Traders who are able to help with the permit process will be valuable allies.

Energy:

Oil US$107.5/bbl vs US$107.3/bbl last week

Natural Gas US$3.487/mmbtu vs US$3.653/mmbtu last week

Uranium US$42.50lb (close 07/12/12) unch on last week

Other:

Iron ore – Australian exports gained to a record in Oct on strengthening demand in China.

•The Coalition has withdrawn from its MOU with the company to preserve and protect the Mapungubwe Cultural landscape.

•This is based on information that Vele Colliery is not complying with water legislation which requires remediation.

•The company denies these allegations and believes that it is compliance with environmental requirements and the withdrawal of the Coalition will not impact its permits.

•This is yet another problem for management in a catalogue of issues relating to the collieries operated by the company.

•The company have suffered strikes and had little choice but to give into a near-crippling wage settlement at Mooiplaats.

•$20m of the $100m of funding promised from Beijing Haohua Energy (China) has been received from the escrow account following FIRB approval. The remaining $80m still requires government approval within China.

•The other projects at Makhado and Holfontein offer better potential in our view, but the question for investors is, will the current cash burn leave sufficient funding for development of the new projects to enable the company to turn to profit in future years.

•Every issue has a silver lining and if the Mapungubwe coalition forces the closure of the Vele colliery maybe the company will loose less money and better preserve cash for future projects

•ENRC has made an offer to buy out the 49.5% of Camrose Resources which holds copper and cobalt interest in the DRC for $550m.

•ENRC paid $175m for their 50.5% stake in Camrose in 2010 – these were assets that had been seized from First Quantum who challenged ENRC and settled for $750m this year.

•Camrose which has near term production potential of 100,000 t of copper, lost $14.8m in the 6 months to June.

•Capex estimated in 2013 is US$300m.

Conclusion: Buying out the rest of the Camrose assets is in line with the company’s strategy of increasing its exposure to copper although question marks will remain over the history of this acquisition and the DRC as a place to operate in. While Gertler is the real winner in terms of returns, the total all in cost to ENRC(around $1.5bn including $750m settlement with First Quantum) of the potential 100,000 t of copper is not expensive.

•The group reported half yearly revenues of $60.7m up 61%, profit before tax of $10.1m.

•Cash and cash equivalents of $39.8m included the $32,2m raised through an equity issue – cash flow from the group over the period was $19.8m - $29.7m in operational cash flow from Freda Rebecca was offset by $7.4m in care and maintenance - $6.4m on BNC and $1m on Klipspringer diamond mine.

•The company spent $4m over the period on capex mainly at Freda Rebecca and $6.6m on exploration assets.

•Freda Rebecca continues to perform and is operating now at an annualised rate of 72,000 oz with a cash cost of US$800/oz.

•BNC’s remains on target for first production in Q2 2013 and is planning to ramp up production to 7,000 t per annum of nickel in concentrate.

•Work on exploration assets in the DRC remain on target.

Conclusion: While there is no new news, the half yearly results underscore the cash generation at Freda Rebecca and the potential for this to increase as production steps up from annualised rate of 50k to 70k.Teh shares trade on an EBITDA of around 3.6x and offers good upside.

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